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Strategic management generally refers to the actions taken by the management of a company so as to develop strategies for the organization. These strategies are aimed at the performance of the organization in the long-run. The management team usually comes up with a business model showing the manner in which the company is to be profitable based on the strategies developed (Baum & Wally, 2003). Generally, two main areas of focus are considered when the management undertakes the development of a strategic management and strategies for growth. First, the management seeks to determine the value customers will attach to the organization’s products. Secondly, the management should establish the level of profits likely to be attained on the implementation of the strategies.
The importance of strategic management cannot be overemphasized. In fact, it is a very critical element of an organization that is hopes to remain relevant and competitive in a modern world of business full of innovations and competition. There are various reasons justifying the implementation of strategic management and growth strategies (Greenwood et al, 2006). First, the performance of the organization is highly enhanced through strategic management. Secondly, organization’s management is able to adapt to the prevailing changes in the business environment. Thirdly, various units of the organization are freely coordinated as they focus on the organizational goals. Finally, the decision-making by the managers is based on the strategic management. It is thus of immense importance that an organization undertakes a strategic management and growth strategy that addresses its needs in the future to avoid being ejected out of business (Thompson & Frank, 2010).
The early 1990’s saw analysts in the Wall Street completely writing off IBM Company. During that time, IBM’s shares were trading at their lowest price for over a decade. Worse still, over 60,000 employees had been laid off even after immense struggle by John Aker, IBM’s CEO until 1993 (Harreld et al, 2006). IBM was slowly but surely distressed and actually failing. Lou Gerstner took over as IBM’s CEO in 1993 when the services unit contributed 27% of the company’s revenue. At the same time, a unit on software was nonexistent. Within a period of 8 years, IBM’s service and software units earned revenues in excess of $35 billion and $13 billion respectively. More so, the combined revenues from the two units made up 58% of the company’s total revenue. Astonishingly, the company’s market capitalization had grown to $173 billion from $30 billion in 1993. Additionally, IBM’s increased by more that 7 times between 1993 and 2001. The positive trend towards good performance in IBM has been remarkable over the years. In fact, by 2006, IBM’s revenue generated by software and services units was in excess of $91 billion.
One big question about the transformation of IBM from a distressed company into a profitable venture is the reasons behind such enormous positive change. There are many diverse stories that tell about the transformation of IBM from its distressed days to days of great performance. However, most of the stories do not actually tell of the company’s strategy and its execution; failing to link them together (Harreld et al, 2006). The story of IBM clearly demonstrates that a company can be transformed from a loss making venture into an organization of immense profitability. In fact, the transformation shows the effectiveness of implementing theory and practice through formulation of strategic management decisions and the actual implementation in the real business situations. Consequently, elaborate strategic management decisions and growth strategies have facilitated IBM to undertake mature businesses with ability to sustain the company in the worst of situations. Some of the businesses that IBM has started from scratch into mature businesses include the production of mainframe computers, production of new types of computers as well as the move into the digital media.
Business strategic management process has been critical for the transformation of IBM. IBM’s strategic management process shared many similarities with other giant organizations with complex operations until the year 1999. Various activities in the company made up the strategic management process prior to the year 1999. For instance, the process involved close monitoring of the developments in technology in the world. Occasionally, several projects would be implemented which later drilled down into specific issues (Harreld et al, 2006). Most importantly, and in a central manner, an annual review of the company’s strategy would be conducted. During the review process, heads of various units would prepare and present plans to senior management executive. The plan presented, also known as a strategic document was said to describe the happenings in each unit’s market. For example, the document would entail information on competition level, changes in technology as well as the expected financial implications on the company. The combined unit strategic reports would eventually make IBM’s strategy.
The year 1999, saw an alteration of IBM’s strategic management process into a completely new fashion. The strategic management process was to be transformed from an exercise by the staff to satisfy the top management into one that would reflect IBM’s actual situation. Apparently, massive weaknesses existed in IBM’s strategic management process prior to the year 1999. Consequently, the new strategic management process aimed at reflecting on the realities and complexities of IBM’s nature of business with the full involvement of the top management team. In fact, the process would aim at detecting the company’s environment as well as seizing the opportunities available for increased profitability. In IBM’s strategic management and growth strategy, a model of business leadership has been developed. In the business leadership model, IBM has made an emphasis on the role played by general managers as well as the crucial interdependence between strategies and their execution.
IBM’s strategies are stimulated through the dissatisfaction of the leaders in the performance of a given unit and a feeling that there exist a gap between the performance at the given period and the desired level. IBM’s general managers use various factors to define gaps in the company’s operations such as clarity of the business owner, metrics of financial measures showing the extent of the gap as well as the specificity of time frames to address the gaps. As a result, IBM embraces a strategic insight embracing four major disciplines: strategic intent, market insight, innovation focus and business design. Similarly, IBM undertakes a strategic execution that incorporates a clear communication design that ensures efficient and effective resource allocation. Moreover, the implementation of the strategy is effected after undertaking honest prevailing organizational capabilities and alignment (Robinson & Pearce, 2011). Thus deviations are detected early and adequate measures undertaken to restore them to normalcy.
The change of IBM’s strategic management and growth strategy from decentralized to a centralized model has had profound positive results. Contrary to the years prior to 1999 when the senior management paid minimal attention to strategic management process, IBM’s strategic management process is of paramount importance to the senior management today. The company’s strategic management and growth strategy have been turned around from an academic focus to action-oriented focus. It is no wonder that IBM continues to grow into a profitable venture to this day.